The move is expected to raise an extra 10 million British pounds per year for the public purse. Chancellor of the Exchequer Jeremy Hunt made the announcement in the annual budget on Wednesday. This means that anyone who has engaged in a cryptocurrency transaction, whether in the UK, America, or affiliated tax havens, will have to report it on their tax return.
However, working out cryptocurrency tax can be complicated, and there are several facets to consider when preparing a tax return. This makes it more important than ever to know what you’re doing and how to report your tax obligations correctly, especially with HMRC keeping UK crypto investors in the spotlight. To help, we’ve compiled a guide to the current rules surrounding cryptocurrency and tax in the UK.
If you’re a crypto trader, the UK may be subject to income tax on your gains, as well as other taxes like Corporation Tax, Stamp Duty, VAT, and National Insurance contributions. Things get more complex, and it’s advisable to secure the services of a crypto tax specialist to help you navigate your return.
HMRC views cryptocurrency as an asset, not money, similar to buying a company share. Selling or disposing of crypto results in a capital gains event, even if used for purchases. HMRC differentiates between three types of crypto assets: exchange tokens, utility tokens, and security tokens. The tax liability of a transaction depends on being an investor or a trader and if it is a capital gain or assessable income.
In addition to the new requirement to report crypto assets separately on tax forms, the government also said it would work to “maximize the potential” of the metaverse while managing downside risks to privacy, security, and harm. With the increased focus on cryptocurrency and tax, it’s essential to know your obligations and ensure you’re reporting them correctly. The rules surrounding cryptocurrency and tax are complex, and seeking professional advice is always advisable if you have any doubts.